Austrian Operators See Data Hunger as Chance to End Price Battle

March 28 (Bloomberg) -- As the consumption of data rises,
Austrian mobile operators see an opportunity to end the price
battle that has been weighing on their results for years.

Telekom Austria AG, one of the two European phone companies
part-owned by Carlos Slim’s America Movil SAB, introduced new
tariffs today, charging customers based on the transmission
speed and volume of data they choose. So far, Austrian operators
have mainly offered flat-rate tariffs.

“This is a big sign to the competition and a considerable
raise compared to older tariffs,” said Bernd Maurer, a Vienna-based analyst at Raiffeisen Centrobank. The country’s operators
are now trying to generate profit from the consumption of data,
he said.

For years, four mobile operators have battled over an
Austrian population of about 8 million. Average monthly revenue
per user declined from more than 37 euros ($47.47) in 2005 to
17.40 euros in 2012, according to data compiled by Bloomberg.
Wireless expenditure as a percentage of gross domestic product
per capita is the second lowest of developed European nations.

Orange Austria, which was recently bought by Hutchison
Whampoa Ltd., offers a contract for as little as 7.50 euros per
month including 1,000 minutes, 1,000 SMS texts and “unlimited”
data with a connection that slows after 1 gigabyte.

Jan Trionow, chief executive officer of Hutchison’s
Austrian unit, said his company may soon introduce tariffs based
on the quality of the data service that customers need,
according to an interview published by Kurier. This product
differentiation is important for the development of mobile
infrastructure, he said, according to Kurier.

Heavy Investing

Austrian operators face a period of heavy investment as the
country’s biggest ever spectrum auction is due to take place
this September. Regulators expect to raise at least 526 million
euros. Operators need the spectrum to develop their faster
fourth-generation networks, which also requires investment in
infrastructure.

“Operators need revenue to build effective networks,”
Trionow said in response to e-mailed questions. It would cost
Hutchison “triple-digit” million euros to build a nationwide
4G network, he said.

Telekom Austria, the nation’s biggest operator by market
share, charges customers an extra 9.90 euros a month to use its
4G network. Companies that invest massively in new technologies,
want to charge a reasonable price for it, CEO Hannes Ametsreiter
said at a press conference today.

Driven by the spread of smartphones and tablet computers,
Austrian consumption of mobile data almost quadrupled between
2009 and 2012. There definitely is a “hunger for bandwidth,”
Ametsreiter said.

“The consumption rises and clients have to pay for it,”
Karim Taga, managing partner at consulting firm Arthur D. Little
in Vienna, said by telephone today.

International Examples

Data will become a more important aspect for tariffs, said
Helmut Spudich, a spokesman for Deutsche Telekom AG unit T-Mobile Austria. “There is a number of international examples
for this,” he said in a phone interview today.

Telekom Austria offers unlimited voice and text messaging
with its new contracts. The risk for operators doing this is
low, said Spudich. “The usage has already peaked. There
probably won’t be more calls just because they are included.”

Average revenue per user will probably stabilize in the
future, said Maurer. “We are not talking about rising revenue
yet,” because customers will be reluctant to trade their old
contracts for more expensive ones, he said.

T-Mobile Austria raised prices for some of its contracts by
15 percent on average at the beginning of this month. That
caused Telekom Austria’s shares to climb more than 5 percent on
March 5 as Carola Bardelli, a Milan-based analyst at Deutsche
Bank, predicted Telekom Austria’s main A1 brand may follow suit.